TE Connectivity Announces Results for Third Quarter of Fiscal Year 2018

SCHAFFHAUSEN, Switzerland, July 25, 2018 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal third quarter, which ended June 29, 2018.

Third Quarter Highlights

• Net sales were $3.8 billion, up 12 percent as reported and 6 percent organically over the third quarter of 2017
• Diluted earnings per share (EPS) from continuing operations were $1.29, up 7 percent from the third quarter of 2017, and adjusted EPS were $1.43, 15 percent growth over the same period in 2017
• Cash flow from continuing operating activities was $800 million and free cash flow was $504 million, with $382 million returned to shareholders
• Orders, excluding the company's SubCom business, were $3.7 billion in the quarter, up 9 percent organically from the third quarter of 2017

Third Quarter Results
For the third quarter, the company reported net sales of $3.8 billion, with diluted EPS from continuing operations of $1.29, and adjusted EPS of $1.43. Cash flow from continuing operating activities was $800 million and free cash flow was $504 million. Excluding SubCom, total orders were $3.7 billion, up 15 percent as reported and 9 percent organically over the third quarter of 2017. The book-to-bill ratio for the quarter, excluding SubCom, was 1.05.

"We exceeded our guidance for the quarter, delivering strong double-digit growth in both sales and adjusted earnings per share through our positive alignment with long-term global growth trends in our markets, the customer focus of our global teams and our industrial technology leadership position," said TE Connectivity Chief Executive Officer Terrence Curtin. "Our performance reflects the benefits of our strong business model, effective execution of our strategy and our focus on co-creating a safer, sustainable, productive and connected future with our customers."

2018 Outlook
For the fiscal fourth quarter of 2018, the company expects net sales of $3.59 billion to $3.69 billion, reflecting an increase of 5 percent on both an actual and organic basis year-over-year, at the mid-point. Diluted EPS from continuing operations are expected to be $1.23 to $1.25, including net restructuring and acquisition-related charges of $0.08. The company expects adjusted EPS of $1.31 to $1.33 which represents a 6 percent improvement at the mid-point versus the fourth quarter of 2017.

For the full year, the company expects net sales of $14.58 to $14.68 billion, reflecting 12 percent actual and 6 percent organic growth at the mid-point versus the prior year. Diluted EPS from continuing operations are expected to be $3.79 to $3.81, including net restructuring, acquisition-related, tax and other charges of $1.77. The company expects adjusted EPS of $5.56 to $5.58, reflecting 15 percent growth at the mid-point compared to fiscal year 2017.

Information about TE Connectivity's use of non-GAAP financial measures is provided below. For reconciliations of these non-GAAP financial measures, see the attached tables.

Conference Call and Webcast
The company will hold a conference call today beginning at 8:30 a.m. ET. The dial-in information is provided here:

• At TE Connectivity's website: http://investors.te.com.
• By telephone: For both "listen-only" participants and those participants who wish to take part in the question-and-answer portion of the call, the dial-in number in the United States is (800) 230-1085, and for international callers, the dial-in number is (612) 288-0337.              
• An audio replay of the conference call will be available beginning at 10:30 a.m. ET on July 25, 2018, and ending at 11:59 p.m. ET on August 1, 2018. The dial-in number for participants in the United States is (800) 475-6701. For participants outside the United States, the dial-in number is (320) 365-3844. The replay access code for all callers is 450417.

About TE Connectivity
TE Connectivity Ltd. (NYSE: TEL) is a $13 billion global technology and manufacturing leader creating a safer, sustainable, productive, and connected future. For more than 75 years, our connectivity and sensor solutions, proven in the harshest environments, have enabled advancements in transportation, industrial applications, medical technology, energy, data communications, and the home. With 78,000 employees, including more than 7,000 engineers, working alongside customers in nearly 150 countries, TE ensures that EVERY CONNECTION COUNTS. Learn more at www.te.com and on LinkedIn, Facebook, WeChat and Twitter.

Non-GAAP Financial Measures
We present non-GAAP performance and liquidity measures as we believe it is appropriate for investors to consider adjusted financial measures in addition to results in accordance with accounting principles generally accepted in the U.S. ("GAAP"). These non-GAAP financial measures provide supplemental information and should not be considered replacements for results in accordance with GAAP. Management uses non-GAAP financial measures internally for planning and forecasting purposes and in its decision-making processes related to the operations of our company. We believe these measures provide meaningful information to us and investors because they enhance the understanding of our operating performance, ability to generate cash, and the trends of our business. Additionally, we believe that investors benefit from having access to the same financial measures that management uses in evaluating our operations. The primary limitation of these measures is that they exclude the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using these non-GAAP financial measures in combination with the most directly comparable GAAP financial measures in order to better understand the amounts, character, and impact of any increase or decrease in reported amounts. These non-GAAP financial measures may not be comparable to similarly-titled measures reported by other companies.

The following provides additional information regarding our non-GAAP financial measures:

• Organic Net Sales Growth – represents net sales growth (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic Net Sales Growth is a useful measure of our performance because it excludes items that are not completely under management's control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity. This measure is a significant component in our incentive compensation plans.
• Adjusted Operating Income and Adjusted Operating Margin – represent operating income and operating margin, respectively, (the most comparable GAAP financial measures) before special items including restructuring and other charges, acquisition related charges, and other income or charges, if any. We utilize these adjusted measures in combination with operating income and operating margin to assess segment level operating performance and to provide insight to management in evaluating segment operating plan execution and market conditions. Adjusted Operating Income is a significant component in our incentive compensation plans.
• Adjusted Other Income (Expense), Net – represents net other income (expense) (the most comparable GAAP financial measure) before special items including tax sharing income related to adjustments to prior period tax returns and other items, if any.
• Adjusted Income Tax Expense and Adjusted Effective Tax Rate – represent income tax expense and effective tax rate, respectively (the most comparable GAAP financial measures) after adjusting for the tax effect of special items including restructuring and other charges, acquisition related charges, other income or charges, and certain significant tax items, if any.
• Adjusted Income from Continuing Operations – represents income from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition related charges, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects.
• Adjusted Earnings Per Share – represents diluted earnings per share from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition related charges, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects. This measure is a significant component in our incentive compensation plans.
• Free Cash Flow (FCF) – is a useful measure of our ability to generate cash. The difference between net cash provided by continuing operating activities (the most comparable GAAP financial measure) and Free Cash Flow consists mainly of significant cash outflows and inflows that we believe are useful to identify. We believe Free Cash Flow provides useful information to investors as it provides insight into the primary cash flow metric used by management to monitor and evaluate cash flows generated from our operations.

Free Cash Flow is defined as net cash provided by continuing operating activities excluding voluntary pension contributions and the cash impact of special items, if any, minus net capital expenditures. Voluntary pension contributions are excluded from the GAAP financial measure because this activity is driven by economic financing decisions rather than operating activity. Certain special items, including net payments related to pre-separation tax matters and cash paid (collected) pursuant to collateral requirements related to cross currency swaps, are also excluded by management in evaluating Free Cash Flow. Net capital expenditures consist of capital expenditures less proceeds from the sale of property, plant, and equipment. These items are subtracted because they represent long-term commitments.

In the calculation of Free Cash Flow, we subtract certain cash items that are ultimately within management's and the Board of Directors' discretion to direct and may imply that there is less or more cash available for our programs than the most comparable GAAP financial measure indicates. It should not be inferred that the entire Free Cash Flow amount is available for future discretionary expenditures, as our definition of Free Cash Flow does not consider certain non-discretionary expenditures, such as debt payments. In addition, we may have other discretionary expenditures, such as discretionary dividends, share repurchases, and business acquisitions, that are not considered in the calculation of Free Cash Flow.

Forward-Looking Statements
This release contains certain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to risks, uncertainty and changes in circumstances, which may cause actual results, performance, financial condition or achievements to differ materially from anticipated results, performance, financial condition or achievements. All statements contained herein that are not clearly historical in nature are forward-looking and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. We have no intention and are under no obligation to update or alter (and expressly disclaim any such intention or obligation to do so) our forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by law. The forward-looking statements in this release include statements addressing our future financial condition and operating results. Examples of factors that could cause actual results to differ materially from those described in the forward-looking statements include, among others, business, economic, competitive and regulatory risks, such as conditions affecting demand for products, particularly in the automotive and data and devices industries; competition and pricing pressure; fluctuations in foreign currency exchange rates and commodity prices; natural disasters and political, economic and military instability in countries in which we operate; developments in the credit markets; future goodwill impairment; compliance with current and future environmental and other laws and regulations; and the possible effects on us of changes in tax laws, tax treaties and other legislation, including the effects of the U.S. Tax Cuts and Jobs Act. More detailed information about these and other factors is set forth in TE Connectivity Ltd.'s Annual Report on Form 10-K for the fiscal year ended Sept. 29, 2017 as well as in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports filed by us with the U.S. Securities and Exchange Commission.